My Lords, I will speak to Amendments 43 and 44, which again deal with dispute resolution. In a way, these amendments need to be seen together, because Amendment 44 is perhaps a patch on the current system, while Amendment 43 takes us forward towards a resolution so that we can structure a suitable mechanism for dispute resolution under trade agreements.
Amendment 44 requires that legal proceedings against the UK under an ISDS would be heard in the UK courts. Essentially, it picks up the point made by the noble Baroness, Lady Blower, that one of the recommendations of dealing with the most egregious aspects of ISDS is to throw the issues back into the domestic courts. It provides a patch that would help us get through this immediate set of problems, because suddenly transparency, fairness and respect for domestic law come into the picture.
I am not going to repeat all the arguments already made very powerfully by the noble Lords, Lord Hendy and Lord Hain, and the noble Baroness, Lady Blower, about the flaws in ISDS. I think we can all accept that it is generally regarded as unfit for purpose in a modern, complex economy, with trade agreements that now cover so many issues. We probably all share the concern that rolling over existing ISDS in continuity agreements is generally very undesirable because it sets such a clear precedent for using ISDS again in future trade agreements. I think we all have a particular eye on the US FTA negotiations and are very concerned about ISDS provisions appearing in that.
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Let me turn to Amendment 43, which in some ways is more interesting. We need a dispute resolution system for trade agreements that is genuinely unbiased, transparent and, importantly, includes rights of appeal. Amendment 43 would require trade agreements to include a commitment by all parties to pursue a multilateral investment tribunal and appellate mechanism to adjudicate in investor disputes. It seems to me that no agreements should be signed without at least this passage and clause in them, because it takes us forward into the future and toward a resolution of the ongoing ISDS problems.
The European Union is already shifting to just such a multilateral court system. The investment court system is incorporated into the EU-Vietnam FTA and into CETA, and will fully take effect when ratification of those two treaties is complete. Can the Minister tell us whether an ICS, rather than an ISDS, will be in the UK’s trade deals—essentially, the continuity deals—now being negotiated with Canada and Vietnam? Under CETA, if I may use that as an example of the
system I am discussing, the EU and Canada will collectively appoint 15 judges: five from the EU, five from Canada and five third-country nationals. They will hear cases of investor dispute on a rotational basis. The rules ensure transparency of proceedings and unambiguous standards of investor protection, but also limit the grounds on which an investor can challenge a decision made by a state. For example, a challenge cannot be made simply on the grounds that profits are affected.
The EU has made it clear that as it negotiates new trade agreements, but also as it rolls over existing FTAs as they expire, it will seek to shift to an ICS. That makes Amendment 43 particularly important. The UK should not be left behind with a dysfunctional ISDS system when the EU, in otherwise similar deals, has the benefit of an ICS. The EU’s long-term goal is to go beyond bilateral arrangements and achieve a genuine multilateral tribunal or court system covering many, if not all, FTAs. It is in many ways modelled on the WTO, but in a much more effective way. The UK historically has argued for such a system. Can the Minister tell me if this has changed?
If the Minister tells me that he is going to insist on moving towards a genuine multilateral tribunal or court system, I need to warn him that it will anger the United States, which at this moment is doing everything it can to scupper the WTO dispute resolution system by refusing to allow the appointment of new judges to the WTO’s appellate body. The WTO settlement system continues only because the EU, along with 16 other countries, has devised a workaround. That is not sustainable in the long term. We really need to hear from the Minister what position this Government are taking, because at present we have a wholly unsatisfactory state of affairs.